Abstract
This study attempts to illustrate the corporate governance system of two large family-controlled firms engaged in the healthcare-related business, Merck KGaA and Fresenius SE. Significant proportion of family-controlled firms provides the background of the German corporate governance system. The availability of legal forms of firm suited for family businesses sets the cause and effect relationships of this ownership structure. The goal of corporate governance for both firms is to assure permanent family control while tapping financial resources from the capital market.
E. Merck KG does this as the partner with unlimited liabilities by resorting to the legal form of partnership limited by shares.
Fresenius uses the pyramidal structure by using public interest foundation as the holding company for the secondary holding as well as for the four operating companies. The company has issued half of its capital as non-voting preferential shares in the market as a source of additional capital, while protecting the firm against possible hostile takeover attempts. As of December 2010 Fresenius is in the process of transforming its legal form into SE&Co.KGaA, partnership limited by shares with the existing Fresenius SE as the partner of unlimited liabilities. Explanations on the new structure are provided. The move is expected to increase autonomy of the foundation. The company is also converting its non-voting preferential shares into common stock with voting rights for improved monitoring by shareholders. Ramifications of these changes are discussed.
Corporate governance of both firms is evaluated for effectiveness and implications for Japanese healthcare companies are suggested.
